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The Masquerade 363

as compensation the sum of 300 million francs over a period of seven years.
CFP in its turn undertook to pay retrospective taxes to Algeria and to repatri­
ate a substantial proportion of the profits it earned from sales of oil for
investment in the development of Algeria’s oil reserves. The posted price of
Algerian crude was fixed at $2.95 a barrel. The agreement between the two
partners was to run for five years in the first instance, and to be renewed for a
further five years by mutual agreement.
Unless CFP was under pressure from the French government to give in to
the Algerians it is not easy to see why it did so, especially over the question of
proper compensation. ELF-ERAP certainly put up a better fight, for all that

ERAP was a state enterprise. It was not until the end of 1971 that the company
reached an understanding with SONATRACH. While it had originally
sought to obtain the sum of 185 million francs as compensation for the
nationalization of 51 per cent of its shareholding, it agreed in the end to forgo
payment in return for the cancellation of the Algerian demand for retrospective
taxes - which only went to show that the demand itself had no basis in legality.
In an agreement signed on 15 December 1971 ELF-ERAP was guaranteed a
yearly quota, at a posted price of $2.75 a barrel, of six million tons of crude oil,

which was about one-third of what it might have expected to receive if it had
not lost its majority shareholding. The agreement, like that with CFP, was to
run for five years and to be renewed by mutual consent. What it all amounted
to, in effect, was a decision by ELF-ERAP to write off its Algerian assets as
not worth holding on to.

The obvious moral to be drawn from the experience of the French oil com­
panies in Algeria was that it was utterly pointless, from the point of view of an
oil-consuming country, to try to ensure security of oil supplies by direct
arrangements with the government of an oil-producing state. The arrangement

had failed primarily because of the bad faith of the Algerian government,
which had broken every agreement it had freely entered into, whether with the
French government or with the French oil companies. France’s experience in
Algeria offered little comfort to the Western industrial nations or Japan. On
the contrary, it provided them with good reason to treat with extreme caution
the kind of suggestion thrown out by the shah during the Tehran negotiations
early in 1971 - that the oil companies should be excluded from the process of

determining oil prices and production levels, leaving these to be agreed by
direct arrangement between consuming and producing countries. The shah, of
course, saw his own role in such government-to-government arrangements as
that of final arbiter, laying down terms in lofty magisterial fashion. There was
also a lesson for OPEC, however, in the sour and sullen way in which the
Franco-Algerian arrangement ended; and this was that sudden and precipitate
moves towards nationalization as a means of obtaining higher oil revenues
could produce such unstable conditions in the international oil market that an